Does our councils promote social value when funding public services via charities?

This is i portant be ause, more and more, councils are sub-contracting their responsibilities for health and social care to charities.

“Small charities that deliver public services have a problem.

The government grants that once helped to fund this work are drying up fast – their total value halved in the decade between 2004 and 2014, according to the NCVO, and has continued to drop ever since. This leaves organisations dependent on income from local council contracts, where the complex tendering process is stacked against smaller providers. At risk of being squeezed out completely, they face what the Lloyds Bank Foundation earlier this year called a “broken commissioning landscape”.

The government knows this is a problem. The House of Lords select committee on charities expressed concerns back in 2016, recommending that the government takes steps to promote commissioning based on impact and social value rather than simply on the lowest cost.

The Social Value Act, introduced in 2012, is one of very few ways in which central government can influence who is commissioned to deliver local services. It requires councils to think about the social, economic and environmental benefits of their decisions when they commission contracts above a certain value (around £170,000).

This means officials are encouraged to do more than simply favour the lowest bidders; they are invited to consider what else a provider could contribute to the area. One organisation might be committed to employing local people, for example. Another might offer to work with small community groups, or bring together existing networks of GPs, schools and others to coordinate services more effectively. The aim is to level the playing field, and enable non-profit providers – such as charities, social enterprises and community businesses – to compete with big private companies.

The government promised a review of the act back in February, something tantamount to an acknowledgement that it is not having the desired impact. Those plans have since been derailed by the snap election and the review is now promised “in due course”.

With the review still pending, we at Power to Change spoke to (pdf) community businesses across England, to find out what changes could be made to improve the situation.

The organisations we spoke to were positive about the aims of the act, and confessed that the commissioning landscape would be “much bleaker” without it. Some councils even welcomed the fact that the act gave them, as they saw it, “permission to explicitly consider social value”.

But many community businesses dismissed the act as “tokenistic”, complaining that it made little practical difference to how councils commissioned or from whom. We found limited evidence that the act actually affected their decisions about whether to tender for contracts: organisations who wanted to work with their council said they would have gone ahead regardless.

If the government wants to improve the impact of the act, our research has some simple recommendations.

Lower the financial threshold

Fairer UK charity contracts will demand long-term government support
The act only applies to local authority contracts worth more than £170,000. Very few community businesses operate at that kind of scale, particularly those committed to working only in their local area. A lower threshold would bring more small organisations into play, either as providers or, more likely, as partners.

Apply it to goods and works, not just services

The principles behind the act are very popular with government, councils and community business alike, so extending it to contracts for goods and works would be another way to introduce social value into commissioning. In his report into the act in 2015, for example, Lord Young celebrated parliament’s decision to commission bottled water for two years from a social enterprise whose profits were shared with the charity Water Aid. There is no reason this sort of innovation shouldn’t be more widespread.

Offer more support for potential providers

Providing more support and guidance, especially some highlighting successful practice, could boost take-up of the act. For commissioners, this could mean giving examples of where they have made savings or improved outcomes through commissioning with social value in mind. For small voluntary or community-led organisations, this could be examples of similar organisations that successfully engaged with the process.

Access to data on the progress and effects of the act is also limited. We recommend the introduction of an open-source, central dataset on the use of the act across local authorities in England, including monitoring data on social value outcomes.

Promote the act more

Our research found an alarming number of social enterprises and community businesses either weren’t sure how the act worked or hadn’t heard of it. The government should give the act greater publicity, targeting community groups who might want to take up the opportunity it offers. For the same reason, the guidance surrounding the act needs to be much clearer and more accessible.

Explain how social value is measured

It can be fiendishly difficult to measure social value, but it can be done – and local groups told us that councils could do more to explain how they will be assessed. This could start with commissioners consulting interested parties locally on what sort of measurements they will be using and how they will be collected, not least so that local groups can decide whether or not to apply for a contract in the first place.

Encourage councils to take risks

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Local authorities like to praise the not-for-profit sector for bringing more innovation and greater flexibility to social problems. But this does not always extend to commissioning decisions, which can favour large, well-known private firms over smaller groups. This may be understandable, but councils will need to overcome this risk-aversion in the future.

Make the act part of wider social change

The act requires councils only to consider social value in commissioning. But not every local authority limits itself to this: Oxfordshire county council and Somerset district council were celebrated last year by Social Enterprise UK for incorporating the act into a wider agenda for social change. This meant using the act to focus on a whole strategy to strengthen the local area, something commissioners all over the country could learn from.